Zinc prices fall 17% in a month

Zinc prices continued their fall over the past month, trading at $1,826 a tonne on the London Metal Exchange against yesterday’s close of $1,853 a tonne. Prices were $2,208 a tonne on the LME in the beginning of May.

While the euro zone crisis has hit all metals, zinc’s fundamentals have been hit more since steel manufacturers have also started cutting prices across the region. The primary use of zin is to make galvanised steel.

The price erosion continued on China’s Shanghai Exchange, too, with zinc dropping five per cent, or 795 yuans from Tuesday’s settlement to 15,025 yuans a tonne.

In the domestic futures market, the prices of zinc tested a nine-month low of Rs 83.50 a kg recently. There was some recovery today, with prices at Rs 86.70 a kg on the MCX.

Capital Line analysts say, “We expect prices to remain with negative bias during June, but 2010 is expected to be a positive year for the metal. Demand from the steel industry and brass, bronze and alloys will increase in the second half of the year, subject to the situation in Europe and Asia.”

For a shorter duration, zinc could remain under pressure due to monetary tightening in countries like India and China. Easing of steel prices in the coming days will also affect the metal adversely. The refined zinc surplus during the first quarter is almost equivalent to the surplus of 2009 and this is likely to induce fresh speculation in the tight range markets.

Tarang Bhanushali, research analyst at IndiaInfoline, said: “Globally, zinc manufacturers have cut production and are liquidating inventories, which will continue the pressure zinc proices, amidst the crisis in the euro zone and China’s demand reduction.”